This year will be one many will want to forget, and no doubt, so will Intel (INTC). The chipmaker giant can’t get a break in 2020, and last week’s Q3 report has done nothing to improve investors’ sentiment.
Which at first glance, is a tad surprising when scanning the results.
Intel reported total Revenue of $18.3 billion, beating consensus estimates by $40 million despite a 4.7% year-over-year drop. Non-GAAP EPS of $1.11 came in the same as the Street’s forecast.
Intel also raised its full year revenue guidance from $75 billion to $75.3 billion, coming in ahead of the Street’s call for $75.16 billion.
All promising so far, but the problem lies in Intel’s gross margins – the lowest it has reported in the past 10 years. As a result, Intel’s data center business was hurt the most, with operating income falling by 39%. Overall, Q3 gross margins missed guidance by roughly 220bps and the company’s Q4 gross margin guide came below the Street’s estimate by approximately 310bps.
Investors evidently did not like the report and sent shares down by 10.5% in the following session. It all adds to a dispiriting 2020 performance, with the stock now down by 19% year-to-date. So, time to buy into weakness?
Not according to Needham analyst Quinn Bolton, who believes Intel’s “market share losses and GM headwinds will remain overhangs on the stock.”
The 5-star analyst further noted, “Intel saw COVID-related headwinds intensify in NSG, IOTG and Enterprise & Gov in 3Q20, and Intel expects these markets to remain weak in 4Q20. As such, Intel expects 4Q20 mix to be similar to 3Q20 except for Cloud SP, which is expected to moderate in 4Q20 after growing 15% Y/Y in 3Q20 due to customer inventory digestion. We remain cautious on INTC shares as we believe the quality of its earnings remains troubled.”
It’s a Hold, then, from Bolton who currently has no fixed price target for the shares. (To watch Bolton’s track record, click here)
The stock is also rated a Hold by the analyst consensus, based on 8 Buys, 13 Holds and 6 Sells. The Street expects 12% of upside over the following months, considering the $52.42 average price target. (See Intel price targets and analyst ratings on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
